IRS Affirms that Transition-Related Care is Tax Deductible

The Internal Revenue Service (IRS) has affirmed that transgender people can deduct their hormone therapy and sex reassignment surgery expenses. This announcement indicates that the IRS will follow the U.S. Tax Court’s 2010 ruling in O’Donnabhain v. Commissioner, which held that gender identity disorder (GID) is a medical condition, and transgender people receiving hormone therapy or sex reassignment surgery as treatment for GID may deduct these costs as medical expenses.

As with other medical expenses, anyone seeking to deduct transition-related care from their gross income must be able to document that they incurred these expenses as treatment for a medical condition—in this instance, GID. For more information about deducting transition-related care from your federal taxes, see NCTE’s factsheet, Federal Taxes and Transgender People: Frequently Asked Questions.

The IRS’s affirmation of this policy marks one of the strongest victories we’ve seen from the Obama Administration. NCTE applauds the IRS, as well as our colleagues at Gay and Lesbian Advocates and Defenders and the Human Rights Campaign, for their work on this issue.

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This entry was posted on Friday, January 6th, 2012 at 1:54 pm and is filed under Health & HIV. You can follow any responses to this entry through the RSS 2.0 feed.
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Jeneva, the short answer is yes, both types of procedure are potentially deductible. FFS and breast augmentation are both forms of sex reassignment surgery, and as our resource doc indicates, the Tax Court decision IRS is now following did speak to breast augmentation specifically.

However, coverage is not categorical, it’s based on individual medical need. Any procedure is only deductible if you can document that your medical providers deemed it medically necessary in your case. You don’t have to submit that documentation with your filing, but as with any kind of deduction you should always have it on file in case you get audited.

Thanks Harper Jean Tobin. The reason I asked is that today was my travel day back home after FFS/BA with Dr. Z on the 29th. I was specifically counting on this being deductible based on the earlier ruling (part of why it was 12/29 instead of later).

Not to take away from the final paragraph, but I actually applaud our conservative-leaning Congress here, too. Typically they get a bad rep for their stances, but believe it or not most conservatives are socially liberal (just not fiscally). I’m very happy to see everyone in the legislation process was able to agree on this and move forward. It’s very encouraging.

As I understand it, this is an administrative law decision in response to the Tax Courts decision and made entirely within the purview of the IRS. It has not required any congressional involvement, which would have obfuscated the whole process. In Congress’s passing general laws authorizing an agency to act, it also empowers that agency to create regulations and administrative laws on how the congressional mandate will be carried out. The IRS has an appellate court, the Tax Court, which in this case held that the IRS denying SRS expenses were discriminatory and that medically necessary treatments were permissible deductions.

One other point, one made in re: Passports, when your MD sends a letter saying it is medically necessary, make sure they do not provide too many details and do not say, as the surgeon in O’Donnabhain did, that the treatment was to improve a feature that was already acceptable. Short, sweet and to the point is enough.

The taxpayer needs to be able to document that the medical treatments being deducted were for “treatment or prevention of a disease.” The IRS has now recognized that gender dysphoria/GID is a “disease” for purposes of the tax code. If the taxpayer can document that the treatments were for the treatment or prevention of some other recognized disease, they would be deductible on that basis. So, for example, a hysterectomy could be for treatment of GID or for prevention of cancer or some other medical condition.

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I’m confused, the linked “announcement” is the decision from the 2010 case, which explicitly states “THIS DOCUMENT IS NOT
TO BE RELIED UPON OR
OTHERWISE CITED AS PRECEDENT BY TAXPAYERS ” – is there an official announcement somewhere?